Doubt creeps into the mmWave business case

Question marks are appearing over the use of millimeter wave (mmWave) technology for 5G, with growth in investments in the sector slowing last year.

While the numbers do not directly point to problems in the mmWave market, particularly given that it outperformed expectations in the previous couple of years, it is not too much of a stretch to say that we still need some convincing on the use of the technology.

New statistics shared by Dell’Oro this week show 15%-20% growth in mmWave revenues in 2021. That’s not a small increase by anyone’s standards, but it is apparently a slowdown following what the analyst firm describes as “two years of exponential growth.” Dell’Oro told us growth was more like 80% in 2020 and much higher than that in 2019 due to starting from a low baseline.

But arguably the numbers themselves are less important than the trend. And as Dell’Oro notes, mmWave RAN revenues were weaker than it had anticipated at the start of last year. However, it also points out that “mmWave NR investments have for the most part surprised on the upside relative to the expectations outlined three to four years ago,” which is worth taking into account; essentially, we could be looking at a natural levelling out of growth after a period of dramatic increases.

Indeed, the analyst firm itself is unphased by the change.

“We are not concerned about the slowdown and the implications for the long-term business case and see this more as a short-term calibration reflecting the fact that the sub-6 GHz spectrum still provides the most compelling RAN economics,” noted Dell’Oro analyst Stefan Pongratz, in a blog post.

We caught up with Pongratz and he provided some further commentary. “We were also in the sceptics’ camp initially when it came to mmWave (we modelled mmWave initially to account for less than 1% of the market) and then had to adjust our forecast upward multiple times to reflect the progress both with devices and infrastructure,” he said.

“So this is why I am not overly concerned about the slowdown in 2021 – the industry has come a long way already in terms of proving the technology. Of course the sub-6 GHz spectrum provides better economics than the mmWave spectrum and it will take some time for this gap to narrow. But there is no magic here, the sub-6 GHz spectrum is not unlimited.”

You only have to look at recent activity from Verizon to see that playing out. Having repeatedly banged the mmWave drum, when that was essentially the extent of its 5G spectrum, the US operator last month brokered a US$170 million deal for early access to the C-band (3.7 GHz-4 GHz) spectrum it won in the 2021 mega-auction… an auction in which it racked up a bill of close to $53 billion, lest we should forget.

Verizon is just one operator, but it still seems fair to say that mmWave is incidental, rather than critical, to operator 5G rollouts thus far. And at the extreme end of the scale, in Belgium earlier this week the regional Wallonia government eased regulation on emissions from 5G mobile base stations, but elected to continue blocking the use of mmWave on the grounds that its health implications are unknown.

Belgium is an extreme example. But it serves to remind us that the use of frequencies at 24 GHz and above is not without its challenges.

Nonetheless, many are pushing on. Brazilian broadcasting conglomerate Globo is boasting about using mmWave on Ericsson’s kit and mobile operator Claro’s 5G network based on 26 GHz frequencies to share footage from the Sao Paulo carnival, according to local news reports. Incidentally, Dell’Oro names Ericsson as the mmWave market leader, which is worth noting. And further north, UScellular on Thursday announced the launch of 5G mmWave in parts of 10 US cities with more to follow later this year.

Admittedly, the UScellular launch refers to a fixed wireless service: its Home Internet+ service, to be exact. And FWA is an area with additional growth potential, according to Dell’Oro.

Mobile is the primary area for mmWave at present but base station and repeater technology advancements should improve the FWA business case, the analyst firm predicted.

So there you have it. There is clearly still a big market for mmWave, be it for 5G mobile or FWA services. But a tailing off of a previously stellar growth rate could well suggest the technology is not shaping up to be the darling of the 5G world.

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